Brazil government does not plan to interfere in central bank, says minister

Brazil government does not plan to interfere in central bank, says minister

(Reuters) – Brazil‘s government does not intend to make changes to the country’s central bank, Institutional Relations Minister Alexandre Padilha said on Thursday, seeking to appease markets after leftist President Luiz Inácio Lula da Silvas public criticism of the institution.

“There is no predisposition on the part of the government to make any changes in its relationship with the central bank,” he said on Twitter.

Lula said in an interview with TV network GloboNews on Wednesday that the formal independence of the central bank, established by law in 2021, was “nonsense” and that the current inflation target hinders economic growth.

The inflation target is defined by the National Monetary Council, which comprises the central bank governor, the finance minister and the planning minister.

This years inflation target, defined in 2020, is 3.25%, with a tolerance margin of 1.5 points up or down. The 12-month inflation rate through December was 5.79%.

Lula returned to the subject Thursday morning, questioning the current level of the country‘s interest rates after the central bank’s 12 consecutive rate hikes to battle inflation.

“What is the explanation for us having an interest rate of 13.5% today？ The central bank is independent, we could even have no interest rate, isnt that true？” Lula said during an event in the presidential palace.

Policymakers paused their aggressive monetary tightening in September, leaving Brazils benchmark interest rate at 13.75%.

Central bank Governor Roberto Campos Neto has highlighted inflationary risks arising from Lula‘s spending boom in this year’s budget to meet campaign promises, stressing that it has affected inflation expectations.

Appointed by former far-right President Jair Bolsonaro, Campos Netos term runs through December 2024.

(Reporting by Marcela Ayres and Peter Frontini; Editing by Chris Reese and Leslie Adler)

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